Singapore's export-led economy had been pressured by the global downturn for more than a year.

Singapore's gross domestic product contracted 4.1 percent on a quarter-on-quarter basis, compared with 0.2 percent growth in the previous quarter, the Ministry of Trade and Industry's advanced estimates released on Friday showed.

The economy grew 0.6 percent year-on-year in the third quarter, data showed, which was shockingly slower than the 2 percent growth in the second quarter. A median growth forecast of 1.7 percent had been predicted by economists.

Meanwhile, the Monetary Authority of Singapore (MAS) said on Friday economic growth was not expected to pick up significantly next year, confirming fears that the Southeast Asian financial hub has been hit hard by the global slowdown and a China slump.

Singapore's export-led economy had been pressured by the global downturn for more than a year, with the city state' dominant oil and gas sector suffering long-term setback due to the continued slump in oil prices.

The persisting export slump was evident from the annualised 17.4 percent drop in manufacturing during the latest quarter. The growth in the services industry, which accounts for about two-thirds of the economy, growth was also pegged back an annualised 1.9 percent.

However, despite the weak GDP figures, the central bank said it will maintain the rate of appreciation of the Singapore dollar nominal effective exchange rate policy band at zero percent. "MAS assesses that a neutral policy stance will be needed for an extended period to ensure medium-term price stability," the central bank statement said.

According to Monetary Authority, 2016 economic growth would come in at the lower end of the 1-2 percent forecast.

"Today's Q3 advance GDP print reinforces our view that tough times are here to stay for Singapore, with growth running the risk of remaining stuck in low gear," said Weiwen Ng, economist for South and Southeast Asia at ANZ Research.

"Notably, services remain entrenched in a recession. The services sector - which accounts for two-thirds of the economy - continued to contract for the third straight quarter, registering a quarter-on-quarter sequential decline of 1.9 per cent in Q3. This portends further downside risks to growth," the analyst added, according to the Business Times.

Minister Lim Hng Kiang said Singapore's H2 gross domestic product could come in lower than the 2.1 percent recorded in the first half. The economy is slated to grow between 1 to 2 percent in the full year, the minister said in parliament.

"Our base line projection is not an outright recession, but we cannot rule out the possibility that the economy will experience some quarters of negative growth on a quarter on quarter basis," Lim said.

Lim said given that Singapore is s a "small open economy" external developments do have an impact on its economy. He said the global economic outlook is likely to remain weak in the near term and investment demand in key advanced economics will be muted.